Massachusetts Panel Would Require Hospitals to Justify Prices

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By Adrianne Appel

A Massachusetts health commission will recommend that hospitals and physicians set their prices based on only three factors, or be required to answer to regulators.

The prices charged by hospitals and physicians in Massachusetts vary greatly, and the 23-member Special Commission on Provider Price Variation, appointed by the governor in September 2016, is discussing ways to even out prices.

The cost of health care in Massachusetts is among the highest in the nation.

“We are not a low-cost state,” Stuart Altman, an economist and chairman of the state’s Health Policy Commission, said March 7 during a meeting of the price commission.

High Prices in Hospitals

The priciest hospitals, which tend to be Boston’s big, academic medical centers, contribute to the state’s rising health-care costs, and these costs need to be controlled, state policymakers have said. At the same time, some of the 43 community hospitals are barely getting by and need a price boost so they can stay in business.

The three highest-priced providers charge two to four times more than what the lowest-price providers charge, according to the state’s Center for Health Information and Analysis.

The price commission is led by two legislative leaders and includes representatives of hospitals, insurers, patient groups, a union and businesses. The panel’s final report will be delivered to lawmakers and the governor March 15. Lawmakers would need to act on the report before any recommendations are implemented.

Three Factors

Providers would be able to consider how sick a patient is and charge more for caring for the sickest patients, according to a copy of the recommendations obtained by Bloomberg BNA March 7. They also may set rates based on the quality of care they provide, as measured by surveys of patients and their willingness to pay more to be seen by a particular hospital or doctor.

Hospitals and doctors also would be able to charge more for caring for “high-cost outlier” patients, people who—mainly because of socioeconomic factors—are sicker and need more medical attention. Medicare allows providers to do this, and it makes sense to allow commercial insurers to also, the commissioners concluded.

Either the Division of Insurance or the state’s Health Policy Commission would be given the task of reviewing and approving or rejecting the proposed contracts between insurers and providers. “Contracts with rates based on unwarranted factors will be subject to disapproval,” the commissioners said.

“This proposal aims to hold both payers and providers accountable” for evening out the variation between high-cost- and low-cost providers, the draft report said.

No More Surprise Billing

The price commission also recommended an end to “surprise, out-of-network billing,” which has become commonplace in Massachusetts. This occurs when patients obtain care from an approved, in-network hospital but are then treated by an out-of-network doctor, and not told about it until the bill arrives. Surprise bills and balance billing “merit a strong recommendation for legislative action,” the commissioners wrote.

The commission’s work toward containing costs would dovetail with any call by President Donald Trump for states to show they can bring down health-care costs, state Rep. Jeffrey Sanchez (D), co-chairman of the price commission and the Joint Committee on Health Care Financing, told Bloomberg BNA March 7 after the price commission’s meeting.

“We are in a fundamentally stronger position than most states,” Sanchez said.

Stronger Price Controls, Flexibility

Lora Pellegrini, chief executive officer of the Massachusetts Association of Health Plans and a member of the price commission, said her group wanted the report to include “stronger tools to deal with the top prices.” The state needs the ability to rein in the higher-cost providers, she said.

She had wanted the panel to include a patient’s social and demographic background as another factor that would justify charging more for care, Lynn Nicholas, CEO of the Massachusetts Hospital Association and member of the price commission, told Bloomberg BNA March 7 after the meeting.

“If someone is a minimum-wage worker living in a poorer community, they will be more costly to care for,” Nicholas said.

Massachusetts hospitals are feeling “huge anxiety” about possible changes to reimbursements as a result of any retooling of the Affordable Care Act by Congress, Nicholas said.

To contact the reporter on this story: Adrianne Appel in Boston at aappel@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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